Charges and investment flexibility have traditionally been the first things SIPP investors have looked at when deciding which provider is right for their particular needs.
Whilst these things are clearly important, after all who wants to be paying more for their SIPP than they need to, and not be able to buy the assets that you want? We would also suggest that there are other things you should take into account before you make your final decision.
1. Financial strength & profitability
The strength of any financial institution is important to investors, and it’s no different with SIPPs.
Improved financial strength generally comes through profitable trading, is your SIPP provider profitable? Do they have a history of profitability and positive cash flow? Positive profitability and cashflow are indications, although not guarantees, of a healthy financial position.
A SIPP provider confident in their financial position should have no problem with providing you with this information, if they won’t, then ask yourself why.
2. Service levels
Service levels are notoriously hard to measure. Once you have experienced a SIPP provider for a few months you will know whether their service levels meet your standards; but by then it’s probably too late.
Awards go some way to telling you which SIPP providers offer an excellent level of service, but it tends to be the SIPP providers with the large marketing budgets which win these, with smaller, equally efficient providers, often going somewhat under the radar.
Talk to your IFA, they will use SIPPs more regularly than you. See if you can find other people with a SIPP where they are happy with the service they receive. Also, do your own research, are queries answered quickly? Do documents you request arrive promptly? Does the SIPP provider have a service charter?
3. Do they offer seamless access to your favourite platforms?
Andy Leggett, SIPP expert and Insight Analyst at Defaqto an independent financial research company explains more: “The right SIPP provider partner will also weave into your chosen partners for banking, dealing, platforms, investment management and property. A bankrupt broker or an inefficient platform can cost your client financially or potentially ruin the client, adviser relationship.”
4. Technology
Think about what functionality you need to have online. If you are buying a single property in your SIPP then you probably don’t need much, but if you are investing in a range of assets, which you plan to trade frequently, you are likely to need much more online functionality.
Speak to the SIPP providers to find out who has the online functionality most appropriate to your needs.
Getting this wrong could get very frustrating, especially if you have to call the SIPP provider every time you want to do something basic like make a contribution or get a valuation.
5. Will your SIPP provider adapt to change?
A SIPP provider which doesn’t, or indeed can’t, change their systems and policies to allow access to the new types of investment or functionality should be avoided.
For example if you want to invest in an ETF or move into Flexible Drawdown and your SIPP provider can’t or won’t allow it, that could necessitate an expensive transfer.
Don’t just think about your requirements now, try to think ahead, and predict how your needs might change in the future.
6. Are they fair on cash?
The interest rates on SIPP ‘current accounts’ are universally poor, generally hovering around based rate or slightly less.
The first question to ask your SIPP provider is whether they are ‘skimming’ the interest from the SIPP deposit account as a way of making up their fees and increasing their profit margin?
Secondly, will your SIPP provider allow you unrestricted access to ‘sippable’ deposit accounts? There is a wide range of deposit accounts specifically designed for SIPPs, but not every SIPP provider will allow unrestricted access, with some working on a small panel or not allowing any additional accounts at all.
7. Is the SIPP provider compliant?
Andy Leggett, Insight Analyst at Defaqto an independent financial research company explains more: “Does the provider help you decide where the limits of flexibility are? Do they ask questions – for instance, to vet investments – and do they ever say no? FSA supervision and the regulatory burden are expected to grow – your provider must meet its duty of care.”
8. How much will it cost to leave them?
We all enter a new relationship hoping that it will last for many years, but often separation and even divorce are a sad fact of life.
When considering your choice of SIPP find out how much they charge for a transfer out. Of course these fees can change, and probably will, but it will give you an idea of whether the provider in principle charges investors for transferring to an alternative SIPP.
Getting the first seven points right will lessen your chances of having to move SIPP provider, of course there are no guarantees!
Summary
Looking past charges and investment flexibility, as important as these factors are, will help you make the right choice of SIPP provider.
You can read more from Andy Leggett by clicking here.
Our SIPP Tables will help you compare a wide range of SIPPs, and our team of independent advisers are here to help you make the right decision, they can be contacted on 0115 933 8433 or by emailing info@investmentsense.co.uk
